How to Make a Splash…Without Splashing Cash? Our use of funds explained.
This post was originally written for investors of the ArkHAUS crowdfunding campaign. To learn more, visit the campaign page here.
As previously detailed, ArkHAUS is currently raising a total of $1.5mm across a dual & concurrent investment raise. The $1.5mm target is derived from a detailed financial analysis of the project’s requirements. There are 3 primary Use of Funds: 1)Vessel Deposits, 2) Membership Marketing, and 3) Pre-Launch Operations. For simplicity, I will use rounded numbers below.
VESSEL DEPOSITS ($900k)
Our partner Arkup is the designer of the beautiful houseboats we’ll be using to create ArkHAUS. They’ve now finalized their production agreement with a shipyard in North Carolina, ensuring these will be USA-made vessels. ArkHAUS is purchasing 4 vessels in this first wave of production. Fear not “beta version issues” with these boats — shipyards like this one are specialized to build custom boats, to perfection, every time. Once the vessels are in production, Nathalie and I will make visits to the shipyard and capture some amazing content for the ArkHAUS community.
In the Summer of 2021, ArkHAUS already placed ‘Wait-List Deposits’ to reserve 4 of the earliest positions (aka “hull numbers”). For production to begin, we must now place a larger ‘Production Deposit’ on the 4 vessels. As we’re under NDA, we can’t announce the exact percentages or pricing of the boats. However, we can state that approximately $900k will be used towards the vessels.
MEMBERSHIP MARKETING ($250k)
Prior to building our financial model, we made some ‘back of the napkin’ assumptions regarding Customer Acquisition Cost (CAC) and a Marketing Budget. As a starting point, we assumed a CAC of $500 per membership. This was derived because it was simply 10% of the earliest Tier 1 Membership price of $5,000. But we also estimated that if we offered a $500 referral fee, the public would be very excited to share membership offering (more coming on this soon). A full $500 Customer Acquisition Cost (CAC), whether it came from referrals, advertising, events, or other marketing, equates to a marketing budget of $180k. We over-estimated and initially set a budget of $250k.
As our initial discussions began with partners, investors, and beyond, many urged us to increase that budget to $400k (a CAC of ~$1,100)…and we initially considered it. However, what no-one saw coming was the word of mouth spread that would drive a substantial amount of Tier 1 membership applications. Even Nathalie and I didn’t expect it to happen as early and substantially as it did. In early December, we closed Tier 1 of Memberships and realized our CAC was in the mid $400s, a 58% reduction over our high budget and even lower than our original assumption. Thanks to this crowdfunding campaign, our amazing community ambassadors, and a variety of other marketing activities, we are continuing to witness the CAC drive lower and lower, which now equates to a required budget of ~$150k. We have decided to re-align our marketing budget back to $250k. This substantial buffer will allow us to establish a deep wait-list as well as begin to create membership wait-lists in the next few cities.
PRE-LAUNCH OPERATIONS ($350k)
ArkHAUS is already working with, or has lined up, a broad array of vendors and partners to bring this project to life. A substantial budget has been set aside for these activities to ensure we can hold to our strict timeline. They include vessel delivery, site preparation, furnishings, equipment, permitting, legal, consulting, staff recruiting, salaries, and other miscellaneous items. Similar to Membership Marketing, the $350k allotted budget provides a substantial buffer, as this is an area we do not want to skimp on.
- Note the above distribution percentages are totals for the 2 investment rounds combined and will vary from the specific use of proceeds in just this Reg CF round alone.
Our plan has always been to raise the correct amount which would accomplish our goals while providing appropriate reserves. This has so far been accomplished by locking in pricing on the vessels (to avoid cost over-runs), using early data to estimate a right-sized marketing budget, and engaging our partners and vendors to set those expenses as well. We are confident in and excited about the course we’ve charted, and ready to push forward on all aspects.
